Three out of every 10 Micro, Small and Medium Enterprises (MSMEs) operating in Nigeria will not survive through the coronavirus pandemic, according to a new survey, showing how bad businesses in the segments have been negatively affected since the outbreak started.
Dubbed “the impact of Covid-19 on Nigeria MSMEs”, the new survey done by FATE Foundation in partnership with BudgIt Nigeria, was designed to give insight into the prolonged impact the COVID-19 pandemic is having on MSMEs in the country.
Responses were gathered from 1,943 businesses, 80 percent of which were micro businesses polled across various sectors in the country.
The survey showed that the impact of COVID-19 on businesses in the segments has been brutal with 94.3 percent of them reporting they are worse-off on all financial fundamentals from sales, to revenue down to their cash flows
That would deal a big blow to the employment, income expenditure, poverty rate and real gross domestic product growth of Africa’s largest economy, which looks onto businesses in the segment to employ about 84 percent of its working population, and rake in as much as 48 percent of national GDP, according to PWC data.
On employment, Nigeria could see a host of its population becoming jobless, a move that would further exacerbate the country’s unemployment rate which is already at a record high of 23 percent as of third quarter, 2018, which happened to be the last time state-funded data agency, NBS, updated the figures publicly.
From the survey, about 80 percent of businesses reported that they were likely to lay off employees.
Their decision to retrench staff is due to a number of factors including prolonged periods of the pandemic, inability to pay staff, poor sales and restriction of movement.
Those who might manage to survive the tsunami of being laid-off from work, would see a deep cut in income which could go a long way in threatening the livelihood of many Nigerians and push more people into poverty.
The new survey is somewhat in tandem with that conducted by the NBS when it surveyed 1950 households, showing that about 4 out of every ten of them said they lost their jobs due to the pandemic, while 79 percent saw their total income decreased since mid March, almost about one month after the index case was first reported in the country
Meanwhile, 47.1 percent of MSMEs surveyed said they were positive that their businesses will survive the pandemic while 22.8 percent were indifferent
As blood is important to man, the same way it is that MSMEs are important to the growth and survival of any economy hence, effectively supporting them especially at a time like this when the global economy is on the verge of a recession, should be a priority path for stakeholders as they work towards economic recovery and slowing down job loss, analysts have said
As a way of supporting households and (MSMEs) that are affected by the coronavirus pandemic, the Federal Government through the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance, Budget, and National Planning, rolled out some monetary and fiscal measures to help mitigate the impact of the pandemic on the economy, Nigerian businesses, and households
One of such was the introduction in April of a N50 billion Targeted Credit Facility (TCF) as a stimulus package for SMEs.
While critics have raised concerns that the intervention fund is too little to move the needle for the country’s over 41 million MSMEs, many businesses have complained of not being able to access any of such stimulus from the government yet. From the survey, 94.2 percent of MSMEs said they haven’t received any support whatsoever.
This might be more crisis looming for Africa’s largest economy whose economy is already showing signs of weakness from the devastating effect of the COVID-19 pandemic.
The Nigerian economy slowed 1.87 percent in the first quarter of 2020 from 2.55 in Q4’19, owing to a slower growth in both the country’s oil and non-oil sector. The country has also been tipped by the World Bank to contract as much as 3.2 percent by year end.
But despite the hurdle, Nigerian businesses have continued to show resilience as they rethink various strategies that would help them in cushioning the impact of the pandemic.
From the survey, about 49.7 percent of entrepreneurs said they see opportunities to create new products/services while about 42.3 percent of them see opportunities to expand/diversify their businesses.
The survey reports made several recommendations to the governments that would support MSMEs in surviving this period, and these are highlighted below
Enabling Financial and Non-Financial Support to Reduce Cash Flow Burdens: under this, the government provides enabling financial and non-financial support that would assist in reducing the cash flow burdens of MSMEs. This could be done by setting up grant programmes in partnership with private and development sector partners which can be targeted at vulnerable MSME segments such as young, female, and micro entrepreneurs.
Low-Interest Financing: the government working with development finance partners can set up targeted sector resilience funds to support essential sectors and industries significantly impacted by the crisis and attendant lockdown.
Non-financial support through regulatory reliefs: Under this, the government can embark on tax deferrals and relief programmes, delay collection of licenses and permit fees and implement tax filing extensions for business related taxes as the lockdown continues to go on. An example of this was a recent announcement made by the Lagos State Internal Revenue Service (LIRS), to extend the deadline for filing personal income tax returns by 2 months.
Provide payroll support to enable MSMEs keep paying salaries: Given that MSMEs provide up to 70 percent of employment support, a payroll support incentive particularly targeted at MSMEs who have been compliant with remitting their Personal Income Tax would be a welcome incentive for businesses to try to retain their employees and keep them on payroll, the report said.
Easing Access to Finance: In addition to concerns about the sufficiency of the established COVID-19 Intervention Funds for Nigerian MSMEs, the report noted that easing accessibility to financing programmes is a key criterion for MSMEs success. For instance, a major application criterion for accessing the TCF fund is the “BVN number” and this might be an impediment for unregistered micro businesses who do not have bank accounts and BVN numbers hence, funds must be designed in such a way that it takes into consideration the dynamics of the different types of MSMEs particularly those within the micro segment who operate in the informal sector; may not speak english as their first language; have limited digital literacy and internet capabilities to access the online funds and; be unaware of the different policy programmes and opportunities to support them at this time.
Data and Internet infrastructure: According to the report, a strong opportunity for the federal and state governments will be to explore policies and regulatory considerations that help to enable internet penetration particularly high speed internet access for non-urban and city segments.
Remote MSME clinics: This gives room for MSMEs to interact directly with key agencies such as the Corporate Affairs Commission (CAC), the National Agency for Food Drug, Administration and Control (NAFDAC) and the Standards Organisation of Nigeria (SON). The survey noted that this period of the pandemic, presents a good opportunity for the government to invest in strengthening SMEDAN’s capacity to arrange remote MSME clinics across the country that mirror the objectives of the physical ones but help to link MSMEs directly with key officials within these agencies to address regulatory constraints that they face.
Source:Businessday.ng